Community Crafts Association of the Philippines, Inc.

February 17, 2009 BIR RULING [NSNP-(S30G-014) 105-09] 27 (D) (1);S-30-008-2006 Community Crafts Association of the Philippines, Inc. CCAP Building, G. Araneta Avenue Quezon City Attention: Ms. Maria Virginia L. Sadorra Executive Director Gentlemen : This refers to your letter dated September 27, 2007 which was referred to this Office by Revenue Region No. 7, Quezon City, by way of its 1st Indorsement dated November 16, 2007, requesting for exemption from the payment of income tax and the filing of the corresponding income tax return under Section 30 of the Tax Code of 1997. Documents submitted to this Office disclosed that the Community Crafts Association of the Philippines, Inc.,is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 51396 dated June 30, 1997; that the purpose(s) for which the corporation was formed is 1. To unify profit and non-profit groups and organizations engaged in the craft industry, into an effective and closely integrated association that will provide its members with common services, pooled resources and facilities and help such members in the implementation of their respective objectives oriented towards the social and economic upliftment of the project beneficiaries they seek to assist by creating opportunities for the poor by improving their earnings capacity and quality of life; 2. To establish a center through which aids and benefits, skills and resources, projects and activities, research and development, may be integrated and coordinated in a purposeful and well-directed manner thereby avoiding the possibilities of wasteful overlaps, duplication and unnecessary competition among members, in a field which calls for unity and concerted efforts; 3. To promote fair trade for handicraft-workers through its vital links with international organizations; 4. To adopt programs aimed at developing socially and economically self-reliant groups among its members, which are the following: a. To expand and enhance the marketability of its crafts by rural and urban member-producers; b. To provide the necessary training and assistance including capital generation and build-up, product design and production management; c. To organize and strengthen producers' organizations in their capability in securing market access, likewise, maximizing access to basic services; d. To increase awareness to health, sanitation, environmental protection; e. To be sensitive to women's issues and foster respect for indigenous cultures; f. To facilitate the creation of a network and organizational links with other relevant organizations. that no part of the income which the corporation may obtain as an incident to its operation shall be distributed as dividends to its members, trustees or officers. Based on the foregoing, this Office is of the opinion and so holds that the Community Crafts Association of the Philippines, Inc. is a corporation organized for the promotion of educational development and social welfare as contemplated under Section 30 (G) of the Tax Code of 1997. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997 on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 1/2% final withholding tax pursuant to Section 27 (D) (1) in relation to Section 57 (A),both of the Tax Code of 1997. Moreover, it is required to file on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. It is requested that a copy of this letter of exemption be attached to the annual information return which your corporation will file on or before the 15th day of the fourth month of each year. Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liabilities, if any. It should be understood that the said exempt organization shall be constituted as a withholding agent for the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, or if it makes income payments to individuals or corporations subject to the withholding tax pursuant to Section 57 of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. DA-S-30-79-98 dated December 29, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service